Ill. House OKs tax relief for businesses, families

The Illinois House sought to appease some big-name companies threatening to leave the state by approving a $330 million package of tax breaks Monday that also includes relief for smaller businesses and struggling families.

The biggest beneficiaries would be CME Group Inc., which operates the Chicago Mercantile Exchange, and Sears Holdings Corp. They, along with the trading company CBOE Holding Inc., have threatened to move to different states unless Illinois helps cut their tax bills.

Most Republicans, even those who supported the corporate tax relief, accused Democrats of creating the situation by raising state income taxes early this year. That increase put new pressure on businesses and families, they said, and it will continue until tax rates are cut again.

"If we think that the companies in this state are not going to be down here talking to us on a regular basis, saying they are going to leave if we don't get our act together, then we are sadly mistaken," said House Minority Leader Tom Cross, R-Oswego. "We've got to roll back our corporate tax. We've got to balance our budget."

Some lawmakers, however, were dubious about responding to threats from businesses, and protesters in the House gallery unfurled a banner saying "Stop Corporate Extortion." Their timing was off, though _ they displayed the message while lawmakers were debating tax breaks for individuals.

House approval marked a dramatic turn-around. Just two weeks ago, a similar package failed 8-99, with some lawmakers demanding more relief for poor families and other opposing any help at all for the poor.

This time, backers split the proposal into separate bills, one dealing with corporate taxes and the other with personal taxes. Each bill then passed because the two groups of opponents were voting against different bills. The business measure passed 81-28. Tax relief for families passed 67-49.

The Senate is scheduled to consider the tax package Tuesday. It passed a similar bill last month, so approval for the new version appears likely.

Gov. Pat Quinn called the package "a win for the people of Illinois" because it would help business while also offering some relief to families.

The financial exchanges had appealed for lower taxes by arguing that it's no longer appropriate for the state to tax every one of their transactions as if they take place on a Chicago trading floor. Instead, most are now handled electronically and do not involve buyers or sellers in Illinois.

Under the proposal headed for the Senate, the exchanges would be taxed on just 27.54 percent of their revenue, a somewhat arbitrary figure that legislators said should be re-examined down the road. That change should save the companies about $85 million a year.

Sears would be granted an extension of an economic development credit it has been getting for years. It will save $15 million a year for the next 10 years. A break on local taxes for its headquarters in the Chicago suburbs would also be renewed. Sears called the House vote a "major step" and said it hoped the Senate would follow suit.

Lawmakers also approved $2 million in tax breaks to encourage production of live theater in Chicago and $350,000 a year in credits for Champion Laboratories Inc., a southern Illinois company that is moving to the Chicago suburbs.

For businesses in general, the package includes a research-and-development credit, a more generous method of writing off losses, extension of a tax break for ethanol and an expansion of what property is exempt from estate taxes. The cost of these measures would be roughly $120 million a year.

Critics fear the corporate tax breaks will take scarce dollars away from state services.

The Service Employees International Union accused lawmakers of concentrating wealth in the hands of the rich "even as average workers are literally taking to the streets to decry growing income inequality." The union asked why CME Group needs tax relief when it is making huge amounts of money _ $316 million in the most recent quarter alone.

The tax breaks for families would cost the state about $110 million a year and come in two forms.

One is an increase in the personal income tax exemption. It now stands at $2,000, which means for every person in a household $2,000 is exempt from state taxes. The new legislation would raise that to $2,050 and require it to rise each year with the rate of inflation.

The other tax break is an increase in the state's earned-income tax credit, which helps the working poor hang on to more of their money. The credit is now 5 percent of the federal tax credit. The House action would raise that to 10 percent.

House Majority Leader Barbara Flynn Currie, D-Chicago, said the increase means a single mother making minimum wage and raising two children would see her $400 state tax bill cut to $259. That money goes back into the economy and helps Illinois businesses, she said.

"This is not money people are going to sit on. It's money they are going to spend," Currie said.